1. Buying a weak stock is like betting on a slow horse. It is foolish.
2. Stocks are only cheap if they are going higher after you buy them.
3. Never trust a person more than the market. People lie, the market does not.
4. Controlling losers is a must; let your winners run out of control.
5. Simplicity in trading demonstrates wisdom. Complexity is the sign of inexperience.
6. Have loyalty to your family, your dog, your team. Have no loyalty to your stocks.
7. Emotional traders want to give the disciplined their money.
8. Trends have counter trends to shake the weak hands out of the market.
9. The market is usually efficient and cannot be beat. Exploit inefficiencies.
10. To beat the market, you must have an edge.
11. Being wrong is a necessary part of trading profitably. Admit when you are wrong.
12. If you do what everyone is doing you will be average, so goes the definition.
13. Information is only valuable if no one knows about it.
14. Lower your risk till you sleep like a baby.
15. There is always a reason why stocks go up or down, we usually only learn the reason when it is too late.
16. Trades that make a lot of intellectual sense are likely to be losers.
17. You do not have to be right more than you are wrong to make money in the market.
18. Don’t worry about the trades that you miss, there will always be another.
19. Fear is more powerful than greed and so down trends are sharper than up trends.
20. Analyze the people, not the stock.
21. Trading is a dictators game; you cannot trade by committee.
22. The best traders are the ones who do not care about the money.
23. Do not think you are smarter than the market, you are not.
24. For most traders, profits are short term loans from the market.
25. The stock market cannot be predicted, we can only play the probabilities.
26. The farther price is from a linear trend, the more likely it is to correct.
27. Learn from your losses, you paid for them.
28. The market is cruel, it gives the test first and the lesson afterward.
29. Trading is simple but it is not easy.
30. The easiest time to make money is when there is a trend.

INVESTING TIPS

1. Buy mid-sized and large stocks that are growing earnings and revenue

2. Buy large and mega-sized stocks that are paying consistent dividends and have low debt-to-equity ratios

3. Read the news on your stocks once a week maximum, once a month minimum

4. The moment a stock disappoints you or makes you wish you hadn’t bought it, sell it. Immediately and regardless of price. Life is too short to hope a bad decision reverses itself

5. Don’t get In or Out of the market, but modulate your exposure up and down as a function of what you think is happening. Your guess based on all the available news and indicators is as good as anyone else’s – and it is more important than anyone else’s for sure because it is your money on the line

6. You should be willing to take a 20% drawdown on every dollar you have in the stock market. Obviously being down 20% is not the goal, but it’s the reality – it can happen at any time. It’s not a permanent loss but you need to invest as though it could be

7. Don’t buy stocks trading over 30 times earnings or under 7 times earnings – something is wrong in both cases. Stay away from anything not trading on a US exchange. Avoid the 52-week low list – a loser is a loser

8. Don’t buy stocks with market caps under $500 million unless you are playing and can afford to lose 100% of that money

9. Sell any stock with a controversial development or red flag no matter what. Let someone else be the hero that swoops in on a mispriced, misunderstood security. You can cheer them on from the safety of the sidelines. Earnings restatements, auditor resignations, massive unexpected earnings misses, filing delays, fraud allegations etc are all automatic sells. Let’s not act like there aren’t 8000 other stocks to choose from in the market

10. Use ETFs to own sectors that are in favor as opposed to individual stocks, when a huge positive trend becomes apparent – you’ll get the upside without the single-stock risk. The aging population and increasing demand for energy are big, fat pitches – it’s hard to swing and miss if you own big swathes of these industries via an ETF, make your life easier

11. Avoid all mutual funds except for asset allocators (balanced funds or go-anywhere can be very useful for investors). Anything based on a discipline (value, growth) or a sector (tech, financial) or a cap size (large, small) is going to underperform its benchmark over the long-term, mean revert versus its peers and cost you more than you need to spend in internal expenses. This is fact not opinion

12. Don’t try to be a trader unless that’s going to be your full-time gig. Trading as a hobby is not the same as being a trader – and it’s less fun than you might think. If you’ve decided to become a trader, find a method and stick with it until you can do it regularly

13. Pay no attention to people who are always pessimistic. The dirty secret is that even when things are terrible, they aren’t that bad. 2008 was the worst sell-off and economic conundrum in 70 years and it only took 18 months for the market to come all the way back. If you fell asleep in 2007 and woke up now five years later, your diversified portfolio including dividend income and unrealized gains/losses looks like nothing ever happened at all

14. Pay no attention to people who are always optimistic. They are selling something. if someone can’t admit that things suck every once in a while, their cheerfulness has an ulterior motive. Or they belong in an insane asylum

15. The financial media wants you to think you are missing out on something and that you need to tune in or click to get up to speed. Pay attention only if you are generally interested and get some entertainment value out of it, most of the time the headlines and segments are dreamed up by editors and producers who need something interesting to talk about each day. And that’s fine, everybody has to earn a living – but don’t think anyone is keeping you informed as a public service

16. Don’t follow gurus. Don’t buy software. Don’t buy DVDs. Don’t listen to “Gut Traders”. Read books by and about people who’ve been successful in the market – but only if you’re interested. They won’t help you become a better investor if you don’t care that much to begin with

17. Remind yourself about the difference between investors and traders: Investors make trades when necessary, traders make trades in the course of doing business – that is what they do for a living and your goals are different than theirs. You don’t get paid out on closed positions or a daily p&l statement.

18. Don’t trade for excitement even though trading can be exciting at times

20. When you finally do become wealthy, hire other people to do this for you and watch them. Go about enjoying the short time we all have left on earth away from the screen. Kiss your kids and play tennis and read books and get drunk during the day just because and go to Australia for a month and buy that car you drove in high school – fix it up and take your sweetheart for a ride. Don’t spend that time reading about inverse correlations between German bund yields and the gold/oil ratio. Because that’s all masturbation and really, who gives a sh*t?

Look, the market always goes up given enough time. It is very hard to find a decade during which returns were negative even though we’re just coming off one now. Stocks go up three out of four years and declines of twenty percent peak-to-trough are extremely rare (declines of 50% are even rarer still and are always a buying opportunity). So for new or smaller investors the name of the game is to stay in, do smart things while you’re in and avoid blowing up.

Quantitative finance started in the U.S. in the 1970s as some astute investors began using mathematical formulae to price stocks and bonds.

Harry Markowitz‘s 1952 Ph.D thesis “Portfolio Selection” was one of the first papers to formally adapt mathematical concepts to finance. Markowitz formalized a notion of mean return and covariances for common stocks which allowed him to quantify the concept of “diversification” in a market. He showed how to compute the mean return and variance for a given portfolio and argued that investors should hold only those portfolios whose variance is minimal among all portfolios with a given mean return. Although the language of finance now involves Itō calculus, management of risk in a quantifiable manner underlies much of the modern theory.

In 1969 Robert Merton introduced stochastic calculus into the study of finance. Merton was motivated by the desire to understand how prices are set in financial markets, which is the classical economics question of “equilibrium,” and in later papers he used the machinery of stochastic calculus to begin investigation of this issue.

At the same time as Merton’s work and with Merton’s assistance, Fischer Black and Myron Scholes developed the Black–Scholes model, which was awarded the 1997 Nobel Memorial Prize in Economic Sciences. It provided a solution for a practical problem, that of finding a fair price for a European call option, i.e., the right to buy one share of a given stock at a specified price and time. Such options are frequently purchased by investors as a risk-hedging device. In 1981, Harrison and Pliska used the general theory of continuous-time stochastic processes to put the Black–Scholes model on a solid theoretical basis, and as a result, showed how to price numerous other “derivative” securities.